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Monday, 18 March 2013

CYPRUS DISASTER: Open dissent in Merkel’s CDU as Schäuble’s attempt to avoid responsibility for Cyprus depositors dismissed as “bare-faced lie”.

Posted by the Slog

“Mein Gott Wolfie, I haff found ze grain of truth”

Manipulation, mendacity and and madness as German, Madrid & Brussels sources admit Schäuble ‘must’ve known what would happen’

Despite German Finance Minister Wolfgang Schäuble’s earnest TV
attempts yesterday to distance both himself and Berlin from the decision
to include small Cyprus bank depositors in the bailout haircut, across
the eurozone his protests were dismissed as completely untrue.
“Bullshit,” said the Slog’s Brussels mole this morning of Schäuble’s
account, “He was the leading hawk in the meeting, demanding a 40% levy
on larger depositors. In order to get that level down to 10%, the other
Finmins were left with no choice but to include the smaller bank
customers. Herr Schäuble could’ve opposed the shift to haircuts for
smaller savers, but he sat there saying nothing. It’s a bare-facd lie”.
Schäuble said on German television that both Berlin and the IMF had
sought to respect the EU’s deposit insurance program, which secures the
savings of accounts with up to €100,000, but it had been the decision of
the Cypriot government, the European Commission and the ECB to hit
small-scale savers with the levy.
Says a well-placed Berlin source, “It is completely ridiculous for
[Schäuble] to suggest that his was a dissenting vote on the question of
small customers in Cyprus. In fact, he was from the start enthusiastic
when Brussels came up with this ‘tax levy’ scheme as a way round the
EU’s deposit guarantee. Every German MP will recognise this as classic
Wolfgang Schäuble behaviour. The high esteem in which he is held by the
German people is in no way reflected inside the Bundestag.”
Meanwhile, people on Cyprus – and in Greece – are reacting to the
deal with anger and disgust, many of them preparing to queue for 36
hours if necessary to withdraw as much of their savings as possible
from ATMs before the confiscation legislation is passed. Others are
waiting to see if the bailout terms will be approved by the Cypriot
parliament, and what happens when the country’s banks reopen after a
national holiday. But as every hour passes, confused postponement seems
increasingly to be in play. There is no way round this for innocent
depositors without a drastic change in the proposal.
President Nicos Anastasiades had planned to hold the vote on Sunday,
but postponed it by one day out of fear of it would be highly negative.
But speaking to the media this morning, Cyprus Parliament speaker
Yiannakis Omirou said the debate and vote would now be pushed back to Tuesday. He
confirmed the intention by saying, “The parliament will convene at 6pm
[4pm GMT] tomorrow, because there now exist amendments to the government
legislation that is to be submitted. Consequently, it requires the
necessary time in parliament, in the finance committee, to examine these
new proposals.” Cypriot Officials were soon saying banks on the island
might have to remain closed through Wednesday as well, and I understand
that a Thrusday reopening has now been confirmed.
But there is far more on the go here than Cypriot politics: the
German media are already having a field-day with dissension in the
Merkel Coalition’s Bundestag ranks. And this isn’t just backbenchers
making trouble: Foreign Minister Guido Westerwelle of the FDP has been
openly criticising the deal among colleagues. Spiegel today reports that
Westerwelle said at a party meeting on Sunday that “It would have been
smarter to exempt small-scale savers” from the bank deposit tax.
Scepticism in relation to Schäuble’s self-exoneration is running high
within the CDU itself. Approval of the bailout in the Bundestag is now a
long way from being a sure thing.
Chancellor Merkel has defended the bank deposit tax, but there is
general agreement in German political circles that she pushed for the
levy for domestic political reasons: she is determined to show the
German electorate that foreigners getting bailouts “at Germany’s
expense” must not be a feature of the future. “It’s a good step that
certainly made our agreement to aid for Cyprus easier,” Merkel said of
the tax. But this is hypocrisy of the highest order: Germany’s gains
from a cheap euro vastly exceed anything she has been asked to
contribute to ezone bailouts thus far.
Meanwhile, an a much broader canvas still, investors, traders and
legislators remain in shock at the ‘solution’ chosen for Cyprus. “A
further escalation of the crisis in tiny Cyprus may have global
implications well beyond the immediate market reactions today” wrote
Julian Jessop, chief global economist at Capital Economics, “the return
of fears that one or more countries may actually leave the euro-zone
altogether could lead to a sustained correction in the prices of riskier
assets generally.” I rather fancy this is something of an
understatement: any loss of faith in southern Europe at this point would
sink both Italy and Spain in short order.
The euro is trading at 1.167 to the Pound (a loss of 1.22 cents) and,
as widely predicted, fears of a bank run in Cyprus and elsewhere in the
Eurozone sparked a mass sell-off on European stock markets so far
today. But gold seems remarkably unfazed by events in the Mediterranean,
and so far as I write the Dow Jones Industrials are at -0.41%, the
Nasdaq Composite -0.68% and the S&P 500 -0.61%.
What we don’t know of course (and won’t for some time) is what’s
happening on bank withdrawals. But unofficially, my Madrid source – who
is rarely wrong – tells me “There is little sign in Spain of anything
unusual in that regard….yet. Far more significant is a growing sense
here that Germany is up to something big, perhaps even a decision to get
the hell out of the euro. It simply isn’t credible to suggest that
Schäuble didn’t know what effect this Cyprus deal would have. After the
briefing against Draghi last week, I think the smart money is on a
selfish move by Berlin, but Merkel won’t want to do that before the
elections there – unless she wants to spike the anti-eurozone guns by
getting out before it all goes tits up. You have to see this Cyprus
haircut as an attempt by the Finance men in Berlin and Frankfurt to test
the water. There’s no other logical explanation. But Merkel isn’t a
risk-taker. To be frank, almost none of it makes sense right now”.
Notable today is that the German media led by FAZ (quelle surprise)
are making hay with the fact that Greece has collected only $19 million
of $13 billion owed by the country’s elite tax debtors – a
redemption rate of under 0.002% percent. My view remains that, when
Berlin starts looking in all directions of the compass for people to
blame, we should all be concerned. Or – if we support UKip – highly
delighted. Or – if we’re called Nigel Farage – very worried indeed that
events are rapidly removing his raison d’etre in British politics.
But I will close by posing this question: is Mario Draghi on holiday?http://hat4uk.wordpress.com/